According to agricultural cencus data, the percentage of small farms (holding <0.5 ha) has increased from 48.5% in 1993 to 56.5% in 2003. Evidence from micro panel data is also inline with this observation. In rice farming region of Java, average farm size has declined from 0.49 ha in 1995 to 0.36 ha in 2007. In the off-Java region, average farm size declined from 1.49 ha in 1995 to 1.35 ha in 2007. The increasing trend of small farm is due to several factors, namely: high population presure coupled with limited non-farm employment, persistent trend of land conversion to non-farm use, and traditional practice of land inheritance. Due to small farm size, rural farm household have to diversify their income to meet their family needs. In Java, 51.7% of household income in 2007 is accounted for nonfarm income. This observation implies that strategic policies to increase household income in rural areas are by increasing access to land resources coupled with promoting off-farm and non-farm employment.